As I stated in my previous piece, only in America do you get to negotiate with your regulator... on a test that "everyone passes" no less. "Look regulator, I don't believe you got it right - here is how we can make it better". It just seems to thrive in this market you have to close your eyes and live in a parallel universe of make believe.

I think when the books are written about this entire era in 4-5 years you will see so much dirt exposed, but by then the "solution" of pumping up every asset class via magic hand waving and disingenuous information (leaked of course) will have "succeeded". And we'll all just chuckle as we look back - Banana Republic style. There are so many earlier injustices that have long been forgotten - such as destroying Chrysler bondholders but never once asking anything of bank bondholders. Such as paying AIG's derivative partners 100 cents on the dollar when in normal bankruptcy like procedures (which AIG would be if not for the US taxpayer) - they'd be happy with 20, 30, 40 cents. Such as the tax loophole Hank Paulson threw in at the last minute to allow banks that buy other banks massive windfalls. Such as.... ugh... it's all good.

p.s. did anyone in mass financial media even talk about Fannie Mae getting in line for another $19B bailout? We don't even talk about these things anymore.

• The Federal Reserve significantly scaled back the size of the capital hole facing some of the nation's biggest banks shortly before concluding its stress tests, following two weeks of intense bargaining. In addition, according to bank and government officials, the Fed used a different measurement of bank-capital levels than analysts and investors had been expecting, resulting in much smaller capital deficits. Government officials defended their handling of the stress tests, saying they were responsive to industry feedback while maintaining the tests' rigor.
• When the Fed last month informed banks of its preliminary stress-test findings, executives at corporations including Bank of America Corp., Citigroup Inc. and Wells Fargo & Co. were furious with what they viewed as the Fed's exaggerated capital holes. A senior executive at one bank fumed that the Fed's initial estimate was "mind-numbingly" large. Bank of America was "shocked" when it saw its initial figure, which was more than $50 billion, according to a person familiar with the negotiations.
• At least half of the banks pushed back, according to people with direct knowledge of the process.